The scapegoating has already started. In almost every sector of the economy that is collapsing, the claim is that “everything was fine until the pandemic happened”. From tumbling web news platforms to small businesses to major corporations, the coronavirus outbreak and the subsequent national riots will become the excuse for failure. The establishment will try to rewrite history and many people will go along with it because the truth makes them look bad.
And what is the truth? The truth is that the U.S. economy – and in some ways, the global economy – was already collapsing. The system’s dependency on ultra-low interest rates and central bank stimulus created perhaps the largest debt bubble in history – the Everything Bubble. And that bubble began imploding at the end of 2018, triggered primarily by the Federal Reserve raising rates and dumping its balance sheet into economic weakness, just like it did at the start of the Great Depression. Fed Chair Jerome Powell knew what would happen if this policy was initiated; he even warned about it in the minutes of the October 2012 Federal Open Market Committee, and yet once he became the head of the central bank, he did it anyway.
For a year leading up to the pandemic, the Fed was struggling to maintain and suppress a repo market liquidity crisis. National debt, corporate debt and consumer debt were at all-time highs. Companies were desperate for new stimulus, and they were getting crumbs from the Fed, rather than the tens of trillions that they needed just to stay afloat. The central bank had sabotaged the economy, but they had to keep it in a state of living death until they had a perfect cover event for the collapse. The pandemic and inevitable civil unrest do the job nicely.
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